"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".

- Papua New GuineaNational Goals and Directive Principles

Tuesday, 3 January 2012

What happens when a country uses its natural wealth for poverty reduction

ExxonMobil Not Finished With Venezuelan Arbitration; Could Win $7 Billion

International Business Times News, January 3, 2012 Tuesday

ExxonMobil has not thrown in the towel in a controversial arbitration in Venezuela over seizure of its assets, in which the International Chamber of Commerce ruled against it in favour of the government of President Hugo Chavez.

Irving, Tex.-based Exxon Mobil is scheduled to receive $907.6 million from Venezuela's state-owned oil producer PDVSA in compensation for the 2007 seizure of the U.S. company's oil wells and refineries. A certain portion was already credited in the form of debt relief and the remaining $746.9 million could be paid out in the form of cash, further debt relief, or $305 million held in U.S. courts, said Patrick McGinn, a spokesperson for ExxonMobil.

Chavez's government seized the company's assets when it nationalized the country's oil industry. Caracas offered ExxonMobil the book value of its seized assets in the Orinoco River Basin while ExxonMobil demanded more. Government officials said the company's demands were excessive. An impasse ensued, and for years the two have been locked in arbitration.

"This ICC arbitration award represents recovery on a limited, contractual liability of PDVSA that was provided for in the Cerro Negro project agreement. Contract sanctity and respect for the rule of law are core principles used to manage our business over the long term," McGinn said in a statement.

ExxonMobil originally asked for $12 billion, but has since lowered its compensation request to $7 billion.

The arbitration is being hailed as a victory for the Chavez government. PDVSA, on its Web site, said the arbitration is consistent with what Venezuela was initially ready to offer.

"After four years of arbitration, the actual amount determined by the ICC Court is, in fact, less than the exorbitant sum originally claimed," read the statement.

Fedel Gheit, an oil analyst with Oppenheimer, told International Business Times the arbitration is a victory for the Chavez government because it is on the low end of the scale.

That being said, the arbitration sum makes it so that ExxonMobil essentially breaks even on its investment in the country.

"To my recollection, that is the exact book value of the asset," Gheit told IBTimes.

But book value and market value are two very different things, and the company's assets could very well be calculated in billions of dollars, he said. With oil prices higher now than they were previously when ExxonMobil first entered the country, Gheit said he suspects the market vaule of the company's assets could have quadrupled beyond its book value.

The settlement, in a way, goes against the whole principle of investing - one does not invest without the intention of collecting on returns.

"It's unfortunate in a way because it makes it difficult for companies to conduct business," Gheit said.

ExxonMobil could receive more in compensation come February when a larger arbitration hearing between the two is argued in the International Center for Settlement of Investment Disputes for the fair market value of the company's assets in the country, said McGinn.

LNG Watch Administrator

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LNG Watch Exclusive: We aim to publish one original story each week that examines a different aspect of Papua New Guinea's LNG project.

LNG in the News: Whether it be an article in the Post-Courier or the Kansas Daily, if it is electronic we will publish it here.

Exxon Mobil Around the World: Exxon Mobil promises Papua New Guinea wealth, development, huge revenue windfalls, jobs and infrastructure. What are the experiences of communities in other developing countries? LNG Watch aims to find out.

Resource Extraction and the Developing World Experience: How does the resource extraction industry work? How can something so profitable impoverish communities? Does resource extraction feed corruption and bureaucratic incompetence? LNG Watch aims to critically explore these questions, and more, by publishing works by leading international experts.

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About Me

LNG WATCH PNG has been launched to raise awareness of the illegalities associated with the signing of the multi-billion dollar PNG LNG project. It was bulldozed through by the PNG Government and the developers. The minority in the signing room were forced to sign, but most of the landowners missed out on signing the agreement.
The people of Hela (Landowners) do not understand the PNG LNG project, and what effect it will have on their land and environment. Nobody has properly informed the local landowners about the development's full impact.
Hidden, corrupt practices have facilitated the project’s development thus far, the landowners and Papua New Guinea more generally have been overlooked. Some of these secret deals are known, some are not yet known. Therefore, the LNG WATCH PNG is set up to monitor and stop the culprits who claim the PNG LNG project as their sole property. LNG WATCH PNG will also dig deep into the past and watch the future of the PNG LNG Project so that the developers and the PNG government pay proper homage to the PNG LNG owners.